Introduction
BestBuy is a large electronics retailer in the US and Canada and has almost 400 stores globally that sell smartphones, gaming consoles, computers, televisions, and other equipment and peripherals. BestBuy operates under distinct trade names in Europe, China, Canada, Mexico, and Turkey. The company uses a customer-centric methodology in all of its US and overseas shops. These initiatives have made it a more socially-friendly store whose goal is to help consumers maintain their electrical appliances and provide instruction on using energy-efficient technologies. This essay focuses on completing a situational analysis, finding difficulties inside the organization, proposing possibilities, and presenting the most compelling proposal for the firm to remain effective against increased competition from conventional and online stores.
Organizational Background
Best Buy Company, Inc. was founded in 1966 as a lone premium retailer Minnesota-based audio specialty shop called Sound of Music. During its infancy, the company utilized an aggressive outdoor marketing campaign that included radio advertisements and public displays. By 1971, the firm had added two more locations, purchased Wheeler, and achieved $1 million in gross earnings (Vithayathil et al., 2020). The 2008-2009 recession resulted in heightened competition constraints in the electronic industry. Best Buy had to adjust its focus from sustaining its conventional big-box retail strategy to linking its shops.
Situational Analysis
Details of the Situation
The findings indicate that Best Buy Company (who) is in a downturn (what) due to powerful pressures within the sector, which have had a detrimental effect on the institution’s product pattern. Since 2008 (when), the corporation outperformed other rivals such as CompUSA and Circuit City Co. However, the company has lately created several strategic assets that aid it in battling with other adversaries for longevity. This has resulted in its proliferation and the present scenario of expanded worldwide merchandise supply. Best Buy has a comparative edge (why) since it can provide consumers with a one-stop store for all their technology needs (how).
Competitive Analysis
This analysis compares Best Buy against Amazon.com, Walmart, and Costco Wholesale as competitors. Regarding the smartphone consumer base, most American clients purchase their phones from cellular carriers instead of other retailers. Consequently, Walmart, Amazon, and BestBuy are the top ten retailers for cellphone acquisitions. Regarding unit share, Walmart led the sector in 2021 with 8.5% of the market. Amazon came in second with a 4.4% market share, while Best Buy fell to third with a 4.1% market share. Costco Wholesale fell behind at position five with a 3.9% market share (Braun et al., 2019). Additionally, regarding the number of brands, Best Buy maintains a robust portfolio of products comprising, among others, Samsung, Apple, Microsoft, and Sony.
Industry Analysis
The sector assessment of the consumer electronic market is evaluated herein in this section. In 2019, the international retail sales of consumer gadgets were worth USD 729.11 billion. The market is anticipated to increase from USD 689.45 billion in 2020 to USD 973.37 billion by 2027. In 2019, the worldwide marketplace for customer electronics was worth USD 729.11 billion (He et al., 2019). In 2020, the audio and video technology category commanded over 60% of the consumer base, with over 2 billion new units sold (He et al., 2019). The proliferation of cell phones and the rising popularity of smart homes will boost the market for sound and video technologies.
Analysis Tools
PESTEL
Political Factors
Best Buy’s worldwide activities face political dangers as companies must cope with malfeasance, trade rules and tariffs, price regulations, taxation policies and subsidies, anti-trust statutes, preferred trade agreements, and wage laws.
Economic Factors
Macroeconomic variables determine Best Buy’s consumer spending and investment. Best Buy must include government initiatives, host nation security and currency fluctuations, competitive advantages in host countries, and labor expenses.
Social Factors
E-commerce prominence is a sociocultural challenge customers face; thus, the firm’s retail sales have grown annually due to Ecommerce.
Technological Factors
The corporation may experience technological challenges in the global market due to the slow proliferation of higher labeling. When unique labels are utilized, it offers a considerable advantage for electronic and technology enterprises like BestBuy (Walsh, 2019).
Environmental Factors
Cost and channel interaction are worldwide market entry barriers. Since BestBuy Company has low-cost operations compared to corporations with multiple branches, it can quickly pick up if one collapses.
Legal Factors
The minimum wage is a hotly disputed issue affecting each country’s production costs. For instance, if China raises its base salary, BestBuy will profit from higher prices, giving it a competitive advantage over other stores.
SWOT Analysis
Strengths
- Market dominance
- Impressive client service
- Extensive portfolio
Weaknesses
- Overreliance in electronics
- Overdependence on brick-and-mortar stores
Opportunities
- Economies of scale
- Global expansion
- Online customer shopping
Threats
- Intense rivalry
- New environmental regulations
Porter’s Five Forces Analysis
Competition
In the retail industry, Best Buy faces stiff competition from the likes of Apple, Wal-Mart, and Amazon, all of whom have been around for decades and are well-entrenched competitors. Wal-Mart’s pricing policies allow it to compete with and even edge out market leaders like Best Buy.
Threat of New Entrants
BestBuy Company has low-cost operations compared to corporations with different lines that can quickly pick up if one crashes. This threatens BestBuy’s entry into the new market, consumer testing, and rich diversity.
Bargaining Power of Consumers
The power of clients can also affect Best Buy’s performance or market position since the company’s goods are delivered to them through E-commerce, price buying, and other means.
Bargaining Power of Suppliers
BestBuy’s primary suppliers include Dell, Apple, Samsung, and many others. Suppliers might act as a facilitator for the sector to simulate item characteristics and design before distributing.
Threat of Substitutes
Electronics from Amazon, eBay, and others threaten BestBuy’s success and growth. Since many people have DVDs, TVs, and phones, the corporation must adopt new technology to reach the market.
Problem
An examination of the current state of affairs at BestBuy reveals two critical issues. First, Best Buy is struggling with falling revenues because of competition from online retailers, a generally unsatisfactory customer experience, a shifting product mix, and an unfavorable public view of the prices at which the company sells its goods. Second, due to factors including pricing competition, rising prices, and escalating sales, declining margins are a significant issue that exacerbates the first problem. The problems will eventually lead to a drop in the company’s customer base and revenue.
Alternatives
Alternative 1
The first alternative is combining the in-store and online experiences for their customers. To improve its offline business, it can design an app to help shoppers find things. The software would let customers touch the merchandise and, if satisfied, scan the barcode to have it shipped as if they had purchased it online. The software would allow consumers in-store and acquire Best Buy merchandise online. The organization would increase user experience and become a powerhouse in-store and online.
Alternative 2
The second possibility is exiting faltering overseas markets like Europe, China, and Canada. By withdrawing from underperforming multinational marketplaces, an option would be to focus on expanding its premium brands, such as Magnolia and Pacific Home and Kitchen. This would enable it to maintain its position as the premier one-stop shop. Thus, the corporation would ensure its clients enjoy exceptional experiences, resulting in high-profit margins. However, exiting overseas markets will have the repercussion of a reduced consumer base. In addition, BestBuy could opt for increasing its online presence within the local market to acquire more client base.
Alternative 3
Lastly, allocating diverse resources to the best strategic alternative will ensure Best Buy resolves the recognized challenges, which also endangers the company’s future growth. According to Rothaermel et al. (2019), the company’s CEO, Joly, feels its competitive edge stems from its multi-channel strategy. In light of this benefit, one option for Best Buy to restore its dropping sales is to expand its online and in-store retail operations. Additionally, investing more in research and development would be an appropriate option for BestBuy. However, it requires additional financing, which may seem costly to the business.
Recommendation and Implementation
The analysis demonstrates that Best Buy remained competitive by electing to scale back its overseas activities and focusing on strengthening its online sales. In light of these advantages, the correct explanation is that the organization should retain this strategy while focusing on enhancing its internet presence. In implementing this technique, the firm’s executives could adopt an organizational change process that incorporates the closed branches within the local business in the US.
Conclusion
The findings show that BestBuy Group is in a slump due to sector challenges that have affected its product pattern. BestBuy’s current status exposes two problems; online competition has hurt Best Buy’s sales, and declining profitability intensifies the first issues due to pricing rivalry, price inflation, and strengthening sales. To mitigate the challenges, BestBuy must combine in-store and online customer interactions. Second, quit faltering global markets, including Europe, China, and Canada. Allocating diversified resources to Best Buy’s best strategic option endangers the company’s future growth. The evaluation shows BestBuy stayed competitive by reducing its activity abroad and boosting online sales.
References
Braun, M., Latham, S., & Cannatelli, B. (2019). Strategy and business models: why winning companies need both. Journal of Business Strategy, 40(5), 39-45. Web.
He, Y., Wang, H., Guo, Q., & Xu, Q. (2019). Coordination through cooperative advertising in a two-period consumer electronics supply chain. Journal of Retailing and Consumer Services, 50, 179-188. Web.
Rothaermel, F. T. (2019). Strategic management: Concepts (4th ed.). McGraw-Hill Education.
Vithayathil, J., Dadgar, M., & Osiri, J. K. (2020). Social media use and consumer shopping preferences. International Journal of Information Management, 54, 1-40. Web.
Walsh, J., PhD. (2021). PEST Analysis. Salem Press Encyclopedia.